Slam the scams

Anyone can fall for a scam. Thankfully, according to a new Which? Money survey, our members are a pretty savvy bunch. However, the Office of Fair Trading (OFT) estimates that around 6.5 per cent of UK adults fall victim to scams each year – losing a total of £3.5bn.

ANYONE can fall for a scam. Thankfully, according to a new Which? Money survey, our members are a pretty savvy bunch.

We found that 89 per cent of you have been targeted by a scam, but around nine out of 10 spotted it was a scam and didn't respond.

However, the Office of Fair Trading (OFT) estimates that around 6.5 per cent of UK adults fall victim to scams each year – losing a total of £3.5bn.

If you lose money in a scam it's highly unlikely that you'll ever get it back. The best way to beat scammers is to learn how to recognise scams so that you can give them a wide berth.

In January's Which?, we reported on scams that involved prizes or work-related cons. In this feature, we give you the lowdown on scams involving property-related matters.

BOGUS HOLIDAY CLUBS

In our survey, we found that 42 per cent had been contacted about or seen adverts for holiday clubs. And nine per cent responded to them – the highest response rate for the scams in our survey.

As part of this scam, you might receive a phone call or letter offering you a free holiday. Or you might be given a scratchcard in the street, which reveals that you have won a free holiday.

The only snag is that, to collect the holiday package, you have to attend a presentation where you will be pressured into joining a holiday club offering *exclusive' holidays.

The meeting might be held in a plush hotel, with smooth-talking staff and free drinks. But don't be fooled. Membership of these clubs can cost thousands and you rarely get what you were promised.

Holidays might be extremely poor quality or never be available when you want them. To add insult to injury, your *free' holiday might end up costing you money – often you have to pay for flights and extras.

What to do

Some holiday clubs are genuine but, if you are approached with the 'free prize' ruse, be wary. Don't feel that you have to attend the presentation but, if you do, don't pay any money or sign anything on the day.

Ask if you can take the contract home to think things through and check it carefully. Make sure that it gives you adequate cancellation rights and that it contains everything that was promised to you in the meeting.

Get a solicitor to check it out if you are unsure. Report any attempted scams to Consumer Direct.

Average loss = £3,030

PROPERTY CLUBS

This scam involves you being invited to a presentation where a salesperson persuades you to sign up for a course, which will teach you how to make money in property investment.

You'll be offered the chance to buy properties, possibly abroad or off-plan, for investment or buy-to-let.

The scammer will try to tempt you with promises of substantial discounts on properties, and guaranteed high rental incomes.

In the worst-case scenario, you pay fees, or fork out, for a property that doesn't exist. Either way, your dreams of becoming a property tycoon are shattered.

Our survey found 36 per cent had been contacted about or seen adverts for this type of activity.

Some property investments are legitimate. Research the company and the property thoroughly.

Ask to speak to at least three previous clients and never buy anything without seeing it first. If you spot a scam, report it to Consumer Direct.

Average loss = £4,240

VALUABLE GOODS

In our survey, 19 per cent were contacted by someone or seen adverts advising you to invest in high-value goods such as champagne, gemstones and art at bargain prices.

Scammers promise that these items will rocket in value and that this is a more reliable investment than buying shares. Items may be overpriced, impossible to sell on or even fake.

What to do

Investment advisers are regulated by the Financial Services Authority (FSA), so check with it that advisers are authorised. Report scams to Consumer Direct, which will alert your local trading standards office and the Office of Fair Trading (OFT).

Average loss = £5,660

SALE AND RENT BACK

This is where companies offer to buy your house at a discounted rate but promise to let you stay there as a tenant.

For those struggling to meet mortgage payments or facing repossession, this might seem attractive, particularly as these companies offer quick sales. There are many genuine sale and rent back schemes but some cowboys are taking advantage of vulnerable consumers.

They might promise that you can stay indefinitely in the property but then give you only a standard six-month tenancy agreement. They might promise that rent won't go up but then increase it by a large amount once the initial period is up. Or they might charge you a large fee upfront, and then disappear.

What to do

Be suspicious of companies offering you a much better deal than everyone else.

For example, promising you much lower rent or offering to pay you 95 per cent of the market value of your home when everyone else is offering 70 to 80 per cent. They could be scammers.

From July this year, the FSA will regulate sale and rent back schemes, so you'll be able to check if companies are authorised with it. Even then, sale and rent back might not be best for everyone so seek independent advice from an organisation like the Consumer Credit Counselling Service.

If you do go ahead, make sure that you get details of future rent and the length of your tenancy in writing.

You might get as little as 70 per cent of the true value of your home. So, if your home is worth £158,000, you could lose £47,400.

BOILER ROOMS

This is an 'old classic' that we've been reporting on at Which? for several years. Here you are approached by a *stockbroker' who offers to sell you shares in a company (that you've probably never heard of), which are hugely discounted or guaranteed to make you a huge profit.

Bogus stockbrokers are usually friendly, knowledgeable and very persistent. If you pay up they will take your money and disappear. Or you'll be charged exorbitant fees for shares that are worthless or difficult to sell on.

One Which? member told us: *I had numerous phone calls over a three or four-month period from various people with US accents wanting to sell me shares. I ended up being exceptionally rude and the calls stopped.'

What to do

If you are cold-called by someone selling shares, just hang up. Don't get into a conversation. No legitimate company would try to sell you shares in this way.

Before buying any shares, always contact the Financial Services Authority (FSA) to check that the broker is authorised in the UK. If they are based abroad, as many boiler-rooms are, your money is not protected.

Report any suspected boiler-room scams to the FSA.

How much could you lose?

Typical loss = £20,000

LOAN SCAMS

You might have seen adverts offering fast loans with good interest rates, regardless of credit history.

When you call the freephone number advertised you're given a short interview and your loan is agreed. It almost sounds too good to be true. So what's the catch?

Before you get the money, you are asked to pay a 'fee' to cover administration costs or insurance.

Chances are that the company will disappear with your money and your loan will never materialise.

What to do

Legitimate loan companies don't ask for fees upfront. Avoid loans from small companies that you've never heard of and stick with Which? Money Best Buys.

Contact Consumer Direct if you have suspicions about a loan company.

How much could you lose?

Average loss = £1,810

FAKE TAX REBATES

In this scam, you receive a call or an email telling you that you're entitled to a big tax rebate or child benefit refund.

Emails look professional and come from official sounding addresses such as taxrefund@hmrc.gov.uk . You are asked for personal and bank details. Once they have your personal information they can steal money from your account. This is a form of phishing (see right for more).

What to do?

The HMRC would tell you in writing if you were entitled to a rebate and would never use email or phone. Forward any dodgy emails you receive to phishing@hmrc.gsi.gov.uk .

How much could you lose?

The contents of your bank account and/or the limit on your credit card.

BE AWARE

You can avoid being taken in by scams by following some simple rules:

Don't trust anyone offering a get-rich scheme – if it sounds too good to be true, it probably is.

If you're unsure about an offer, talk it over with family and friends or call Consumer Direct for advice.

Never hand over money or personal details to anyone that you don't know.

If you are targeted by a scam, or fall for one, don't keep it to yourself. Report all scam attempts to Consumer Direct, or the FSA if it's a boiler-room scam.

The OFT believes that less than 5% are reported and raising awareness can stop thousands of other people from becoming victims.